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Answers are provided by Robert S. Kaufman
Comparison Between Tier 1 & Tier 2
(Posted June 13, 1999)
Question 22: Can you explain the basic difference between Tier 1 and Tier 2?
Answer: Tier 1 is like a Social Security benefit. It is based on your earnings from both the Railroad Retirement and the Social Security programs. The full benefit amount is reduced by any seperate Social Security benefit that you receive.
Tier 2 is calculated like a private pension -- it is based only on rail earnings. It is based on the total years of rail service and the average monthly earnings credited under the Railroad Retirement program.
Tier 1 is increased annually by the same percentage as Social Security, veterans' benefits, and federal civil service pensions are increased. Tier 2, on the other hand is only increased by approximately one-third of the cost-of-living increase.
Please see my answers to Q&As 12 16 for additional discussion.
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